This section is intended to introduce the reader to various aspects of art, which may be related to various aspects of the present invention that are described or claimed below. This discussion is believed to be helpful in providing the reader with background information to facilitate a better understanding of the various aspects of the present invention. Accordingly, it should be understood that these statements are to be read in this light, and not as admissions of prior art.
In the business world, many companies offer products or services to consumers in order to produce revenue. However, these companies must often compete against each other for a finite number of customers. In order to gain a competitive advantage, some companies offer a broad variety of products (or services) in an attempt to increase their market share. While such variety has the potential to attract more customers, this proliferation of products can also be problematic.
For instance, as a company offers an increasing number of products, customers can become increasingly overwhelmed and frustrated by the difficulty of choosing from a large selection. Similarly, salespeople can find it difficult to make recommendations to customers from among the large array of choices. Further, in addition to the loss of market share, product proliferation generally contributes to increased actual expenses for a corporation. Such expenses include the costs associated with additional time and labor, shipping costs, and the cost of the inventory itself, both in terms of capital costs and the risk of obsolescence.
Frequently, customer orders actually consist of multiple products. In these cases, product proliferation can also complicate fulfillment of these orders. If one product in an order is unavailable, the delivery of the order could be delayed until that product is replenished. When a company offers a large number of products, it is typically difficult and costly to maintain high availability for all products in its offering. As a result, poor availability of even one product can cause delays in delivery of numerous orders, which, in turn, could adversely affect market share.
The range of products offered by a company is referred to as a product portfolio. Many companies select such a product portfolio by simply choosing the products that generate the most revenue. More specifically, a company might rank products according to how much revenue the products generated in recent historical orders, and choose a desired number of top ranked products. While this approach sounds obvious and is easy to implement, it can lead to poor product selection because it ignores the relationship between products and orders. For example, there could be a low revenue product that is an element of many customer orders. While the revenue generation attributable to that individual product or part might be slight in comparison to other products, it could be a necessary component of various orders containing other products that generate much larger revenues. Thus, excluding such a product might lead to loss of future order revenue.